Wednesday, March 04, 2009

Secret squirrel

Armageddon Ambrose has recorded the response of Joaquin Almunia, EU economics commissioner, to the growing crisis in the eurozone.

"We are equipped intellectually, politically and economically to face this crisis scenario, " says our Joaquin. EMU economies in distress can count on EU solidarity if they get into trouble. They do not, as the wise and noble Mr Brown suggests, have to go cap in hand to the International Monetary Fund.

Thus speaks Joaquin, "It is clear that there are serious problems in certain countries. If a crisis emerges in one eurozone country, there is a solution before visiting the IMF."

"The solution exists," he says, then lowering his voice … but "It's not clever to tell you in public. " In fact, he might have said, it's a secret squirrel solution - it's so secret, we're not even going to tell ourselves what it is!

But, with this secret solution, the probability of a eurozone break-up is "zero". And such is Joaquin's boundless confidence that he roundly declares: "Who is crazy enough to leave the euro area? Nobody. The number of candidates to join is growing."

With such amazing "intellectual equipment" on display, who can possibly have any doubt that this crisis is drawing to a close? Never mind that Ambrose is telling us that the " crossover index" measuring default risk on low-grade corporate bonds jumped above 1,100 yesterday, nearing the panic levels after the Lehman collapse last year.

Who cares that Klaus Schmidt-Hebbel, the chief economist of the OECD club of rich states, is saying that, "Some of these countries are facing a big crisis. This is not only a balance-or-payments crisis, it is also financial crisis with a risk of default on debt"?

Why should we even begin to care that the "massive accumulation of foreign debt" creates the risk of repeating the Mexican and Asian blow-ups in the 1990s?